June 2008
Beginner to intermediate
440 pages
11h 56m
English
book
Equity Valuation: Models from Leading Investment Banks
by Jan Viebig, Thorsten Poddig, Armin Varmaz
Content preview from Equity Valuation: Models from Leading Investment BanksBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
2
The Fundamental Value of Stocks and Bonds
The fundamental value of an investment is the present value PV0 of its expected, future cash flows. Given a risk-free rate of 4%, an investment A that pays a cash flow (CFA of USD 100 000 at the end of one period with certainty is worth USD 96 154 today as an investor receives USD 100 000 at the end of one period if he/she invests USD 96 154 today at a risk-free rate of 4%:
If investment A currently traded below its fundamental value of USD 96 154 – for example, at USD 90 000 – an arbitrageur could borrow USD 90 000 at 4%, invest it in investment A and realize a risk-less profit of USD 6400 before transaction costs at maturity [USD 100 000 − 90 000 × 1 .04]. If investment A traded above its fundamental value – for example, at USD 105 000 – an arbitrageur could borrow investment A at a small borrowing fee from the owner of the asset, sell it for USD 105 000 in the market and invest the proceeds of the short sale at the risk-free rate. At maturity the investor would realize a risk-free profit of USD 9200 before borrowing fees and transaction costs [USD 105 000 × 1 .04 − USD 100 000]. As a result of these arbitrage transactions, the price of the asset which trades below its fundamental value would increase and the price of the asset which trades above its fundamental value would fall until all arbitrage opportunities are eliminated and the ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.